I am intrigued by the growing number of carbon offset investments promising robust returns to investors. The one I'm talking about today — HeavyFinance — is based on loaning money to farmers to purchase equipment for no-till farming, which in turn results in carbon sequestration and offset credits that pay back the loan (and more). HeavyFinance is looking to remove a gigaton of CO2 by 2050.
The site seems to promise 12% returns or more (although the small print says that investors ARE taking the risk of lower or no returns). And the economics seem based on an offset price of $35, which is pretty robust for soil carbon credits.
What's really notable is 1) there is no discussion of voluntary carbon market and pricing risk; 2) there is no discussion of the additionality of no-till agriculture (which has been a complicating variable forever); and 3) there is no discussion of the permanence of soil carbon sequestration, other than to note that farmers can exit the program at any time without consequence (which actually does say quite a bit about potential permanence!). There is mention of a VERRA methodology being used for the project.
According to its website, HeavyFinance is funding a bunch of projects already, is already generating carbon offsets, and is looking to expand significantly — a billion tons by 2050 is a robust goal!
I would love to understand how this investment gets past due diligence, and what investors are really assuming when getting involved. If you have any insight, let me know.